Income Redistribution: Rangel’s Reward

Democrats sure know how to say thank you. Or perhaps it’s just coincidence that a bill passed by the House last week contains a special tax perk for trial lawyers—one of the largest contributors to Democrat campaigns. Buried in the Energy and Tax Extenders Act of 2008 is a provision, offered by House Ways and Means Chairman Charlie Rangel (D-NY), which would let trial layers deduct the up-front expenses they incur while chasing ambulances—er, filing contingency-fee lawsuits—whether or not they anticipate future reimbursements for these expenses. Under current law, these expenses, deemed “loans” to clients, are deductible only if not repaid. Rangel’s Reward would allow lawyers to claim deductions now and, in essence, defer tax payments until they receive reimbursements—which, as we know from watching infamous class-action lawsuits unfold, can take years.

A Rangel spokesman claims, “This is purely a matter of fairness and tax equity. The individuals who would benefit from this provision are already eligible to deduct expenses related to contingency-fee lawsuits, the only question is when.” In reality, though, the bill gives trial lawyers a green light, no speed limit, and free gas to launch a convoy of ambulance chasers.
Of course, as a rule, tax cuts are a good thing, but when they come in the form of special-interest loopholes that reward often-frivolous, economy-wrecking lawsuits, we hardly see the “fairness and equity” in that.

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